Next shoe to drop for U.S. job seekers: lower wages

By Nick Zieminski - Analysis

NEW YORK (Reuters) - With "no end in sight" for U.S. job losses amid a recession that could stretch into 2010, American workers will soon have to contend with another blow to their confidence: stagnant, or even falling wages.

Job seekers -- already coping with the highest unemployment rate in a quarter century, their savings mugged by a plunging stock market -- can also expect lower pay once they land a new job, labor market experts say, because the current downturn shows no signs of turning around anytime soon.

"There's no end in sight," said Tig Gilliam, chief executive of Adecco Group North America, the third-largest U.S. employer behind Wal-Mart Stores and the postal service.

"March is going to be the same, and I don't see anything that will make April better."

Lower wages, in turn, could further erode the outlook for the U.S. economy by hurting consumers' spending power.

The government's February employment report showed 651,000 jobs eliminated outside the farm sector, while losses in the previous two months were revised upward. The unemployment rate jumped to 8.1 percent, highest since 1983.

Job losses in professional services categories are accelerating, and temporary payrolls -- typically a leading indicator -- show no signs of improving, Gilliam said.

The temp sector, where losses preceded the decline in the wider labor market by a year, must stabilize before any hint of a wider jobs recovery.

Temporary workers as a percentage of the total workforce are down to 1.42 percent, a level not seen since May 1994. The bottoming of this metric typically correlates with the end of recession, said BMO Capital Markets analyst Jeffrey Silber in a research note.

"Unfortunately, we're not there yet," Silber said.

TEMP PAYROLLS DOWN

Temp payrolls are down by a quarter from a year ago, and have declined for 26 months in a row. In the recession of the 1980s -- the one many economists say most compares to the current situation -- temp employment fell by a third from peak to trough.

To be sure, job openings still exist. Adecco cited engineering and technical job postings, as well as legal and finance positions, including in the mortgage business where a pickup in refinancing activity has spurred demand for sales and processing professionals.

But while job openings remain, employers are increasingly able to keep a lid on wages, further stretching consumers. The latest jobs report showed wage growth slowed in January and February from its pace at the end of last year.

According to Adecco, many clients are looking to hire people at lower rates than in the past, with the biggest wage pressure at the lower end of the pay scale, he said, among people earning around $10 or $12 per hour.